The impact of narco-capitalism on the formal economy and institutional development: A systematic literature review

Abstract

The impact of narco-capitalism on the formal economy and institutional development is the subject of a rigorous literature review in this study. A system in which illegal enterprises, such as drug trafficking, merge with established institutions and have a direct impact on social dynamics, institutions, and economic growth is known as narco-capitalism. The study examines how drug trafficking affects institutions through corruption and the co-optation of public officials, distorts markets, and creates parallel economies, all of which erode public confidence and state power. The methodology employs bibliometric analysis to identify and examine relevant documents using databases like Web of Science and Scopus. According to the research, narco-capitalism produces a shadow economy that skews competition and increases economic dependence in affected areas. At the institutional level, it creates a "parallel state" in which organized crime influences governance and public policy. Furthermore, the findings highlight the shortcomings of traditional punitive measures and militarization, underscoring the need for a more comprehensive and cooperative strategy that incorporates financial regulations and alternative avenues for economic development. The study concludes by emphasizing the importance of developing public policies and regulatory frameworks that support inclusive and sustainable growth in affected areas, strengthen institutions, and reduce dependency on illegal activities.